Looming Jobs Data May Lead To Another Choppy Trading Day

The major U.S. index futures are currently pointing to a modestly lower open on Thursday, with stocks likely to move back to the downside after ending yesterday’s lackluster session slightly higher.

Ongoing concerns about rising tensions in the Middle East may weigh on Wall Street, although trading activity is likely to remain subdued ahead of the release of the Labor Department’s closely watched monthly jobs report on Friday.

Economists currently expect the report to show employment rose by 140,000 jobs in September after climbing by 142,000 jobs in August, while the unemployment rate is expected to hold at 4.2 percent.

The data could impact the outlook for the U.S. economy as well as expectations regarding how aggressively the Federal Reserve will lower interest rates.

With the jobs data looming, CME Group’s FedWatch Tool is currently indicating a 63.0 percent chance the Fed will lower rates by a quarter point and a 37.0 percent chance of another half point rate cut.

A day ahead of the release of the more closely watched monthly jobs report, the Labor Department released a report this morning showing an uptick by first-time claims for U.S. unemployment benefits in the week ended September 28th.

The report said initial jobless claims rose to 225,000 last week, an increase of 6,000 from the previous week’s revised level of 219,000.

Economists had expected jobless claims to inch up to 220,000 from the 218,000 originally reported for the previous week.

The bigger than expected rebound came a week after jobless claims fell to their lowest level since hitting 216,000 in the week ended May 18th.

After recovering from an early move to the downside, stocks showed a lack of direction over the course of the trading session on Wednesday. The major averages spent the day bouncing back and forth across the unchanged line before eventually closing slightly higher.

The Dow edged up 39.55 points or 0.1 percent to 42,196.52, the Nasdaq inched up 14.76 points or 0.1 percent to 17,925.12 and the S&P 500 crept up 0.79 points or less than a tenth of a percent to 5,709.54.

The early weakness on Wall Street partly reflected concerns about escalating tensions in the Middle East following Iran’s ballistic missile attack against Israel on Tuesday.

While Iran has said it is not interested in a wider war, the attacks have contributed to a surge by the price of crude oil, leading to worries higher energy prices will lead to a resurgence in inflation.

Waning optimism the Federal Reserve will continue to aggressively lower interest rates also weighed on stocks after payroll processor ADP released a report showing stronger than expected private sector job growth in the month of September.

ADP said private sector employment climbed by 143,000 jobs in September after rising by an upwardly revised 103,000 jobs in August.

Economists had expected private sector employment to advance by 120,000 jobs compared to the addition of 99,000 jobs originally reported for the previous month.

Selling pressure waned shortly after the start of trading, however, as traders continued to express optimism about the outlook for the economy following the jobs data.

While most of the major sectors showed only modest moves, semiconductor stocks saw a significant rebound following recent weakness, driving the Philadelphia Semiconductor Index up by 1.5 percent.

Considerable strength was also visible among networking stocks, as reflected by the 1.5 percent gain posted by the NYSE Arca Networking Index.

Computer hardware and energy stocks also saw strength on the day, while airline and housing stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are jumping $1.34 to $71.44 a barrel after rising $0.27 to $70.10 a barrel on Wednesday. Meanwhile, after tumbling $20.60 to $2,669.70 an ounce in the previous session, gold futures are inching up $1.30 to $2,671 an ounce.

On the currency front, the U.S. dollar is trading at 146.72 yen versus the 146.47 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1030 compared to yesterday’s $1.1045.

Asia

Asian stocks turned in a mixed performance on Thursday amid rising tensions in the Middle East due to the conflict between Iran and Israel.

Japanese markets outperformed regional peers after Prime Minister Shigeru Ishiba said the country is not in an environment for an additional rate increase.

The U.S. dollar hit a more than six-week high against the yen and gold edged lower following stronger-than-expected U.S. private payroll data released overnight.

Oil prices surged for a third day running on worries over potential disruptions in crude flows from the Middle East region.

Mainland Chinese markets remained closed for a weeklong public holiday. South Korean markets were also closed for the National Day holiday. Hong Kong’s Hang Seng Index slumped 1.5 percent to 22,113.51, with real estate and tech stocks leading losses.

Japanese markets rallied and the yen extended its drop as Prime Minister Ishiba and Bank of Japan Governor Kazuo Ueda downplayed the likelihood of an interest rate hike soon.

Investors also digested survey data that showed Japanese service sector activity expanded for the third straight month in September, although growth eased slightly.

The Nikkei 225 Index surged 2.0 percent to 38,552.06, while the broader Topix Index settled 1.2 percent higher at 2,683.71. Automakers Honda Motor, Toyota, Mitsubishi Motors and Nissan climbed 1-2 percent.

Australian markets ended on a flat note as miners advanced, offsetting losses in the energy sector.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index rallied 1.0 percent to 12,572.66.

Europe

European stocks are broadly lower on Thursday after a survey showed the euro area private sector shrank for the first time in seven months in September.

The final HCOB composite output index fell to 49.6 in September from a three-month high of 51.0 in August – bolstering expectations for an interest rate cut at the European Central Bank’s meeting on Oct 17.

Elsewhere, U.K. business activity growth eased to a three-month low in September.

In France, President Emmanuel Macron endorsed a temporary tax on the country’s largest companies to get the public finances back on track.

Investors also fretted about the possibility of a wider war in the Middle East after Iran launched its largest-ever attack on the country.

The French CAC 40 Index is down by 0.9 percent and the German DAX Index is down by 0.6 percent, although the U.K.’s FTSE 100 Index has bucked the downtrend and crept up by 0.1 percent.

The British pound weakened after Bank of England Governor Andrew Bailey reportedly hinted at a “more aggressive” path for cutting interest rates if inflation news stays positive.

In a wide-ranging interview with the Guardian, Bailey held out the prospect of the Bank becoming a “bit more aggressive” with interest-rate cuts.

In corporate news, Ericsson has moved to the downside on reports that the telecom supplier is considering moving and leaving Kista.

Stellantis NV has also moved sharply lower after output dropped at all six of its factories in Italy in the first nine months.

British Land Company shares have also dipped in London. The property firm said it has acquired a portfolio of seven retail parks for 441 million pounds.

LANXESS has also tumbled. The specialty chemicals company has signed a contract to sell its Urethane Systems business to Japanese UBE Corporation.

Residential landlord Vonovia has also fallen after saying it expects a total liquidity inflow of around 4 billion euros for 2024, same as the previous year’s level.

On the other hand, Telecom Italia has moved sharply higher after Italy made a new offer for its Sparkle submarine cable unit.

Tesco has also jumped. The supermarket group lifted its annual profit forecast after profit and revenue increased in the first six months of the financial year.

France’s Alstom has also moved to the upside after receiving an order from Proxima for 12 Avelia Horizon very high-speed trains.

U.S. Economic News

A day ahead of the release of the more closely watched monthly jobs report, the Labor Department released a report on Thursday showing an uptick by first-time claims for U.S. unemployment benefits in the week ended September 28th.

The report said initial jobless claims rose to 225,000 last week, an increase of 6,000 from the previous week’s revised level of 219,000.

Economists had expected jobless claims to inch up to 220,000 from the 218,000 originally reported for the previous week.

The bigger than expected rebound came a week after jobless claims fell to their lowest level since hitting 216,000 in the week ended May 18th.

At 10 am ET, the Institute for Supply Management is scheduled to release its report on service sector activity in the month of September.

The ISM’s services PMI is expected to inch up to 51.7 in September after rising to 51.5 in August, with a reading above 50 indicating growth.

The Commerce Department is also due to release its report on new orders for manufactured goods in the month of August at 10 am ET. Factory orders are expected to rise by 0.2 percent in August after surging by 5.0 percent in July.

At 10:40 am ET, Atlanta Federal Reserve President Raphael Bostic is scheduled to deliver the keynote speech at the Opportunity & Inclusive Growth Institute’s annual Research Conference.

The Treasury Department is scheduled to announce the details of this month’s auctions of three-year and ten-year notes and thirty-year bonds at 11 am ET.

Stocks In Focus

Shares of Levi Strauss (LEVI) are moving sharply lower in pre-market trading after the clothing company reported weaker than expected fiscal third quarter revenue and lowered its full-year revenue guidance.

Chipmaker Wolfspeed (WOLF) may also come under pressure after Mizuho downgraded its rating on the company’s stock to Underperform from Neutral.

Meanwhile, shares of EVgo (EVGO) are soaring in pre-market trading after JPMorgan upgraded its rating on the electric vehicle charging company’s stock to Overweight from Neutral.